The Supreme Court held that transactions involving the outright sale of land, even if accompanied by ancillary facilitation activities, do not constitute taxable services of a ‘Real Estate Agent’ under the Finance Act, 1994. The activity must involve a clear contract of agency. Mere sale of immovable property is excluded from the definition of ‘service’.
Facts Of The Case:
The respondent, M/s Elegant Developers, entered into three Memorandums of Understanding (MOUs) with M/s Sahara India Commercial Corporation Ltd. (SICCL) for the identification, acquisition, and development of land parcels for real estate projects. Under these agreements, Elegant Developers was responsible for tasks like purchasing contiguous land blocks, obtaining title clearances, securing necessary government approvals, and facilitating the final registration of the land in SICCL’s name. SICCL agreed to pay a pre-determined ‘fixed average rate’ per acre. The respondent’s profit or loss margin was the difference between this fixed rate paid by SICCL and the actual price it paid to the original landowners.The Service Tax Department, after an investigation, issued a show-cause notice alleging that these activities constituted taxable services of a ‘Real Estate Agent’ for the period from October 2004 to March 2007. The Department raised a tax demand of over ₹10 crore, imposed penalties, and invoked the extended period of limitation, alleging wilful suppression of facts. While the Commissioner confirmed the demand, the Appellate Tribunal set it aside, leading the Revenue to appeal before the Supreme Court.
Procedural History:
The case originated with a Show Cause Notice dated April 22, 2010, issued by the Directorate General of Central Excise Intelligence to M/s Elegant Developers, demanding service tax for the period October 2004 to March 2007. The jurisdictional Commissioner, vide order dated September 30, 2013, confirmed the tax demand of over ₹10 crore, imposed interest, and levied penalties under various sections of the Finance Act, 1994. Aggrieved, Elegant Developers appealed to the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The CESTAT, vide its final order dated June 21, 2019, allowed the appeal and set aside the Commissioner’s order. Subsequently, the Revenue filed statutory appeals before the Supreme Court under Section 35L(b) of the Central Excise Act, 1944, challenging the CESTAT’s decision, which culminated in the present judgment.
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Court Observation:
The Supreme Court observed that to qualify as a ‘Real Estate Agent’ under the Finance Act, 1994, there must be a clear contract of agency for rendering services related to real estate. It noted that the MoUs between the parties did not establish a principal-agent relationship but were agreements for the outright sale of land at a fixed price. The Court emphasized that the respondent’s profit, derived from the difference between the fixed price and the cost of acquisition, was inherent to a sale transaction and not a commission for services. Consequently, the activity fell under the specific exclusion for “transfer of title in immovable property” under Section 65B(44)(a)(i) and was not a taxable service. On limitation, the Court held that the Revenue failed to prove any deliberate act of suppression by the respondent to evade tax, as all transactions were conducted transparently through banking channels.
Final Decision & Judgement:
The Supreme Court dismissed the Revenue’s appeals, upholding the Appellate Tribunal’s order. It conclusively ruled that the transactions undertaken by M/s Elegant Developers constituted a pure sale of immovable property and not the provision of a taxable service as a ‘Real Estate Agent’ or ‘Real Estate Consultant’. Consequently, the confirmed demand for service tax, along with interest and penalties, was set aside. The Court also found no justification for invoking the extended period of limitation, as there was no evidence of deliberate suppression of facts by the respondent with intent to evade tax.
Case Details:
Case Title: Commissioner of Service Tax vs. M/s Elegant Developers Citation: (2025) 5 SCC 601 Civil Appeal No.: Civil Appeal Nos. 11744 - 11745 of 2025 Date of Judgement: November 10, 2025 Judges/Justice Name: Justice J.B. Pardiwala and Justice Sandeep Mehta
Download The Judgement Here